Chapter 1: Take Care of the Family

Gen 1 and 2 (and generations past) built the farm to take care of the family. While we are focused on business succession planning, the ultimate purpose is to keep the family together. A good business plan can minimize family tensions by setting up clear roles and expectations, clarifying the business relationships to allow the family relationships to thrive. A good estate plan ensures that everyone is treated equitably, not necessarily the same or equally, because each family member is unique.

Prior to setting up business entities and estate planning, it is important to have open, honest conversations with family members. It starts with letting everyone know that you are thinking about the long-term operation of the farm after you retire or die, and it is never too early to start those conversations. Even new farmers should think about what will happen to the farm and family if the unthinkable happens. You can share your goals for the future of the farm and find out what family members want in their relationship to the farm.

We also start with the family because the business succession plan needs to be driven by Gen 2’s estate distribution plan, which is the outline for who gets what when Gen 2 (and/or Gen 1, if applicable) passes away. This means that you should consider your broad estate planning first. To develop a distribution plan, Gen 2 should create a list of all their personal and business assets alongside a list of everyone who will get a bequest. At this point, it would be a broad outline, such as “The most important thing is for the farm to pass on to the next generation when I die,” “I want child A to end up with the farm,” “I want child M to get the china and child N to get our wedding rings,” or “I want to leave a donation to our church.” A distribution plan doesn’t need to be much more complicated than that at this point. This is a good time to talk with your family to find out which gifts will be meaningful or helpful to them. Don’t assume you know what your family members truly want! These conversations can be very illuminating for many families. The best way to honor your family members is to give them gifts that are meaningful. Giving individualized gifts recognizes the special relationship you have with each member of your family.

This is a great time to sit down and start your estate distribution plan because it can proceed without any more instructions. The future of your family and farm is the best motivation for getting started, which then may inspire you to move deeper into the planning process. Every family is unique, and you are the only one who can begin your estate distribution plan.

You should also be actively engaged in finding a Gen 3 successor from within or outside of the family. The lack of a family successor is a major stress for many of today’s farms. Today, the average age of Oregon farmers and ranchers is around sixty years old, and many do not have a family member in the next generation who wants to come back to manage the farm. Hence, finding a nonfamily successor is becoming necessary for many farms. Meanwhile, many young people are training to go into agriculture but do not come from a farming family and are looking for opportunities to enter a career in agriculture. Preparing your family for a nonfamily successor is an important conversation. You may also work with multiple potential successors until you find one that is right for the long term. Your potential successor may start out as an employee, move into management duties, take over management, and finally take ownership interests in the farm. You will want time to find and train potential successors until the right person comes along, understanding that not everyone who trains with you will work out.

Finally, getting an idea about your goals, your successor, and your family’s wishes will be the foundation for conversations with your estate and business lawyers. Your goals for the future and your family’s expectations will impact the way you structure your business organizations, succession plans, and estate plans. As you go through this process, expect that it will take significant time, effort, and expense. It’s a lot cheaper to work with your family by hosting family meetings or participating in farm succession trainings than it is to work out all of these details in your lawyer’s or accountant’s office. By starting the process with your family, armed with knowledge about your options, you will save time and money in the long run.

Step 1—Take care of the family by gathering ideas and expectations.

• Let everyone know that you are thinking about the long-term operation of the farm after you retire or die.
• Talk to your family about your estate plan. Find out how family members would prefer to be recognized in your estate plan. Start establishing expectations about the business succession and estate plan well before it is drafted.
• Discuss farm succession with family members who express an interest in managing the farm to assess their level of commitment and expectations and involve them in the decision-making process.
• If you do not have a Gen 3 successor in the family, seek out Gen 3s that would be a good fit by networking with other farmers, connecting with local or state agricultural education programs such as those at Oregon State University, or connecting with other organizations that manage farm training or young farmer programs.
• If you do not have a Gen 3 successor, set up an internship or limited farm manager position as an introductory period with no long-term commitments. You may need to work with several potential successors before you find the right fit. Use the process to plan and practice turning over management tasks to as well as training an incoming Gen 3.
• Identify professionals that can help you through the process. Start with any professionals that you already work with, ask for referrals if you need to find other experts, and get advice from lenders and other farmers.
• Attend a business succession workshop or seminar and explore further business succession resources.